NBSIR 75-778

ETIP: THE FIRST 18 MONTHS

A Progress Report of The Experimental

Technology Incentives Program,

National Bureau of Standards

Jordan D. Lewis

Office of Experimental Technology Incentives Program

National Bureau of Standards

Washington, D. C. 20234

August 1975

Interim

Prepared by

Experimental Technology Incentives Program

U S DEPARTMENT OF COMMERCE

NATIONAL BUREAU OF STANDARDS

NBSIR 75-778

ETIP: THE FIRST 18 MONTHS

A Progress Report of The Experimental

Technology Incentives Program,

National Bureau of Standards

Jordan D. Lewis

Office of Experimental Technology Incentives Program

National Bureau of Standards

Washington, D. C. 20234

August 1975

Prepared by

Experimental Technology Incentives Program

U.S. DEPARTMENT OF COMMERCE, Rogers C.B. Morton, Secretary

James A. Baker, III, Urtder Secretary

Dr. Betsy Ancker-Johnson, Assistant Secretary for Science and Technology

NATIONAL BUREAU OF STANDARDS. Ernest Ambler. Acting Director

Interim

ABSTRACT

In February 1974, the official Program Plan for the

Experimental Technology Incentives Program (ETIP) was approved

by the National Bureau of Standards, the Department of Commerce, and the Office of Management and Budget. At that time,

funds were made available for the conduct of ETIP under that

Plan. The purpose of this paper is to review ETIP ' s performance since that time, a period of 18 months. The basis for

this review will be the Program. Plan itself.

PROGRAM BACKGROUND AND PURPOSE

Given that technological change is a key ingredient in

the progress of a developed economy, ETIP's goal is "The

development of a set of technological change policy recommendations and the body of knowledge necessary for their

effective use."* Further, "while ETIP will, in the course of

its experimentation, stimulate changes in technology, such

changes are a by-product of its primary task. The significant

output of ETIP must be pragmatic and effective methodologies

that the Federal Government can use in stimulating the entire

process of technological change .. .within the economy in

general

During the past 18 m.onths ETIP has developed a preliminary

set of ''technological change policy recommendations" and has

embarked upon a series of experiments and studies designed to

begin testing and examining these and identifying others.

This preliminary set of recomm.endations is outlined below.

INITIAL POLICY AREAS AND PRELIMINARY REC0MMJ3NDATI0NS

ETIP has selected a number of areas in which to concentrate

its early activities. These areas and related policy recommendations are:

Procurement

Government is the largest purchaser of most civilian goods

produced in the Nation. Traditionally, government practices

have emphasized lowest purchase price, which in turn has meant

older technology and less cost-effective products. But

government purchasing could lead the market, thereby reducing

market entry risks for new products while simultaneously

obtaining greater value for the taxpayers' dollar.

*A11 statements in quotation are drawn from the Program Plan.
- 2 -

ETIP is currently conducting and planning a series of

procurement experiments to test the following policy

recommendations

(1) An increased use should be made of performance . specifications, which describe how a product is to work (in

contrast to design specifications which describe how it

is to be made) in government purchasing, so as to give

suppliers increased opportunities to innovate.

(2) Life-cycle costing (LCC) , which provides for contract

awards for those products having the lowest total ownership

cost (purchase price plus discounted operating and maintenance

costs, etc.) should be used whenever possible as a basis

for contract awards rather than merely lowest purchase price.

(3) Use should be made of value incentive clauses (VIC)

which provide for a sharing with contractors of 50 percent

of any cost-saving innovations introduced into their products.

(4) System purchasing, in which a collection of distinct

products intended to operate together as an entity (e.g.,

clinical laboratory, office building) is purchased under a

single comprehensive performance specification, should be

used whenever appropriate.

(5) Whenever possible and practical, innovation purchasing

should be used. Briefly, innovation purchasing involves the

agency in actively seeking or responding to product innovations

which are not currently on the market but which appear to

offer advantages over established products in meeting user

needs

(6) The Government should communicate cost, performance,

and other experience information gleaned from its use of

civilian products to the general marketplace.

(7) The Government should be an early user of product-related

features that might influence product innovation (such as

mandated warranties) so as to help clarify their attributes,

significance and impact.

(8) The Government should encourage and facilitate the

aggregation of public and quasi-public markets (such as State

and local governments, hospitals) so as to reduce duplications

of effort in specification and test method development and

to reduce fragmentation of demand.
- 3 -

Regulation

While serving to protect the public from undue economic

or physical harm, regulatory agencies frequently impose

unnecessary costs, uncertainties, delays, and constraints

on technological change. The estimated unnecessary costs

alone amount to billions per year.

ETIP ' s regulatory experiments and studies that are underway,

planned, or anticipated are intended to test or examine

one or more of the following or related recommendations:

(1) Accelerate and improve the quality of regulatory

standards development to reduce uncertainties and delays

in the regulatory process.

(2) Increase the codification of and otherwise facilitate

the meeting of certification requirements. (In certification

regulation, a government license is required prior to sale

or use; in standards regulation, a firm must assure that a product or process meets specified standards before it can

be sold or used. The agency is responsible for proving noncompliance once the product has been sold or the process

initiated .

)

(3) Make better use of available information (e.g.,

foreign data from sim.ilar situations) in the certification

process

(U) Consider alternatives to regulation that in a given

instance might accomplish the same purpose. For example, it

might be desirable to provide crop insurance against pest

damage rather than use pesticides in some instances.

(5) Pursue a careful consideration as to whether standards

or certification regulation is required in a given instance.

In such consideration it should be noted that certification

regulation is employed when the social costs of noncompliance

are deemed too high to warrant the use of the less stringent

standards regulation. Examples include standards regulation

for autos and effluents, and certification for aircraft and

pesticides.

(6) Reduce overlapping authorities of different regulatory

agencies or coordinate their efforts when they do overlap

so as to reduce confusion and delays in the process.
- 4 -

(7) Consider structural changes in the administrative

authority and procedures of the independent regulatory

conunissions to facilitate creative regulatory responses to

changing market/economic conditions, to reduce ambiguities

in decisions, and to generally speed up the regulatory process.

(8) Develop means for assessing the cum.ulative impact of

numerous individual regulatory decisions on a given economic

sector

(9) Wherever possible employ general rule-making rather than

relying on case-by-case decisionmaking.

(10) Employ electronic data processing system.s to process

information and expedite proceedings depending upon large

volumes of information.

(11) The relationship between regulatory agencies and

consensus standards bodies should be made explicit. The

vagueness of present relationships causes considerable confusion and delay in the regulatory process.

(12) To the extent feasible, mandatory standards should

be performance based. This allows continued innovation once

the standards are adopted. In addition guidelines should be

provided which are sufficient (but not necessary) ways of

meeting the mandatory requirements.

(13) Following a regulatory change, agencies rarely, if ever,

conduct field surveys to determine the effect of the change

in order to correct deficiencies therein. In view of the

problems raised by regulation, this should be made a common

practice

(14) Precipitate coordinated decisionmaking between agencies

that regulate different aspects of the same industry so as

to facilitate innovation in that industry.

(15) Facilitate market entry and otherwise increase competition in economically regulated sectors.

(16) Require agencies to develop and publish an overall plan

for implementing the statutes for which they are responsible.

This plan would then underlie agency action, and a deviation

from it without suitable explanation would be grounds for

judicial reversal. This would provide a forum at which the

basic principles of the regulation in question are determined.

The parties interested in particular aspects of regulation

could then appear at one time instead of keeping up with

individual and isolated occurrences.
- 5 -

Civilian Research and Development

Unlike their defense and space counterparts, agencies that

sponsor applied civilian RgD do not control the production

of nor do they purchase the goods flowing from this R6D.

Yet these agencies typically give little thought to the use

of their RSD results before and during the conduct of the

RgD. As a consequence the application of this R6D, which

amounts to some ^5 billion per year, is widely recognized

as being very poor.

ETIP's interests with respect to civilian R£D focus on

tentative policy recommendations such as:

(1) Create formal R£D market planning functions in RgD

agencies, these functions to be charged with identifying

and assessing user priorities, determining the availability

of capital, labor, and other resources needed to convert

RgD results into user goods, characterizing the likelihood

that the organizations to be involved will marshall these

resources to these ends, and thus define RgD program objectives,

strategies, and priorities, and etermine appropriate RgD

resource allocations.

(2) Require substantial non-federal cost-sharing in development and demonstration projects.

(3) View demonstration projects as field experiments that

are experimenting with the field, and conduct them only when

technological uncertainties have been reduced to low levels.

(4) Obtain strong user involvement in the design of RgD

programs

Small Technology-Based Businesses

Small technology-based businesses, which have been key contributors of important innovations, find it increasingly

difficult to raise venture and equity capital. They also

face regulatory compliance costs that are proportionately

greater than for larger firms.

ETIP's interests in this category focus on:

(1) Reducing unnecessary barriers to the flow of capital to

these firm.s.
- 6 -

(2) Facilitating compliance by small firms required by

Government regulations to invest in technological change.

•

, ... " Financial Assistance

Through grants and subsidies the Federal Government, provides

close to $100 billion annually to State and local governments, utilities, industries, and others for the creation,

acquisition, or operation of capital goods. In providing

this financial assistance, little thought is given to how it

affects technological change.

In developing this policy area, ETIP is interested in studies

and experiments that would illuminate policy recommendations

such as

(1) Develop specific guidelines for determining when

financial assistance should be provided in lieu of regulation.

(2) Develop specific guidelines for determining how

financial assistance should be provided in conjunction with

regulation

.

(3) Develop specific guidelines for determining how

financial assistance should best be employed in conjunction

with incentive-type procurement policies employed by State

and local governments and other organizations receiving such

assistance

.

(4) Develop specific guidelines for coordinating Federal

R6D sponsorship and financial assistance programs.

(5) Develop specific guidelines for determining when

financial assistance should be provided to the producers

of a good and when to the users

.

Advanced Planning and Research

In addition to the above, ETIP is undertaking other efforts

in order "to provide an improved basis for choosing policy

questions for future investigation as well as to permit more

effective direction and evaluation of the already selected

policy areas .

ETIP's work in this category, as well as the policy areas

discussed above, is detailed in the appendix to this report.
- 7 -

PROGRA.M STRATEGY

Developrr.ent

The Progran Plan states that "EII? r.ust provide both for

the development of nevr policy guidelines and for their

adoption by those agencies that are to use then. .

. "

In the development context, all ETIP projects that are exploring

new ground "rest on existing supported hypotheses in the

research literature..." as v/ell as hypotheses developed by

ETIP and others "that have significant apparent validity

in the federal context." Further, "specific policies contained v;ithin the scope of agencies" have been " f omulated

consistent with those hypotheses." As proposed in the Progran

Plan, a series of field experiments has been initiated, and

evaluation efforts have begun to "analyze the factors contributing to the variance betvreen theory and experience."

Adoption

'In order that the responsible agency be thoroughly prepared

to adopt the new policy guidelines ... ETIP (invol\''es) the responsible agency at the earliest possible stage in the design

and definition of the . .

. pro j ects relevant to the agency's

mission." Indeed in every such instance the relevant agency

is "an active collaborative partner in the conduct of the

relevant projects and the analysis of the results." Further,

in order "to develop an organizational connitnent" to applying

the project results, each agency is asked, where feasible, to

connit agency resources to the project, a step vrhich also

increases the leverage of ETIP's efforts."

The list belovr describes ETIP and other agency resources that

have been comirdtted to cooperative projects over the past

18 months. Detailed descriptions of these projects nay be

found in the accendix.
- 8 -

Procurement Projects

Pro j act Cooperating Agency

36 Public Building Service

59 Federal Supply Service

63 Federal Supply Service

64 Federal Supply Service

71 Federal Supply Service

80 Veterans Administration

ETIP Resources

$175,000

$ 16,500

$200,000

$ 66,000

$100,000

$450,000

Agency Resources

$476,000 + staff

$ 1,500 + staff

$ 25,000

$ 10,000

$ 10,000

3 staff positions

Regulatory Projects

Pro j ect Cooperating Agency

31 Federal Railroad Admin.

48

85

Environmental Protection

Agency

Occupational Safety & Health Adm.inistration

ETIP Resources

$150,000

$250,000

$200,000

Agency Resources

$500,000 + staff

$110,000

$215,000
- 9 -

Civilian RSD Projects

Pro j ect Cooperating Agency

7 Clemson University

13

67

National Science

Foundation

Department of Health,

Education, £ Welfare

Small Business Projects

Pro j ect Cooperating Agency

27 Small Business Admin.

ETIP Resources Agency Resources

$475, 000

$ 99,350

$220,000

Members of the

Clem.son Consortium

are contributing

fibers, chemicals

and cloth for testing,

$99 , 350

Part-time of Chief,

Development Division,

Office of Planning

g Development, OFEPM/

DHEW

ETIP Resources Agency Resources

$150,000 Staff

28 Small Business Admin. $200, 000 Staff

32

46

77

Connecticut Product

Development Corporation

Economic Development

Administration

State Funds

Small Business Admin.

Small Business Admin.

$300,000

$375,000

$ 10,000

$200 , 000

$500,000 bond issue

Staff

6,000 envelopes for

mailing & printing

of 6,000 invitations

for Symposium.
-loin the conduct of these cooperative projects, each agency

"provides a 'project champion' from its staff to serve as liaison

with ETIP, provides for continuity of involvement over the life

of the project, and identifies the agency with the project in

formal communications. Further, in all cooperative projects,

ETIP's agency partners "assume lead-agency responsibility" for

the respective projects.

Performance Measures

"The primary measure of ETIP's success will be the number and

quality of the ETIP policy guidelines adopted and used."

Although 18 months is admittedly a rather brief period for

applying this measure, the following can be noted:

(1) The use of life cycle costing has begun at GSA and is

becoming widespread. This is already saving the Government

millions of dollars and has brought about technological change

in the marketplace.

(2) Value incentive clauses have been introduced at the Federal

Supply Service of GSA and have become mandatory for all contracts employing specifications and valued over $100,000. They

will become mandatory for all such contracts for the entire

Government within a few months.

(3) The Federal Supply Service (FSS) has created the National

Furniture Center as the first of a series of commodity centers.

These provide a focal point for manufacturers from a given

sector and government agencies to discuss related issues so

as to facilitate competition and information flow. Other center

to be created will handle tools, automotive supplies, office

and paper products, and office equipment.

(4) A marketing research capability has been created at FSS so

as to improve the identification of user needs and the translation

of these into incentive-type specifications.

(5) The Energy Research and Development Administration has requested guidelines for the design and conduct of demonstration

projects

.

(6) The Veteran's Administration has created an experimental

procurement function to manage a major series of procurement experiments that will test the ability of this largest purchaser

of health care products in the Nation to influence product development and use across the health field.
APPENDIX

Individual Project

Reports

Page

Table of Contents • ii

Explanation of Milestone Symbols

PROCUREMENT AREA:

1. Power Lawnmower Experiment A-1

2. Window Air Conditioner Experiment A-2

3. Frostless Refrigerator Experiment A-3

4. Home Water Heater Experiment A-4

5. Household Ranges (Electric) Experiment A-5

5. Household Ranges (Gas) Experiment A-6

29. Symposium - Federal, State, Local and Industry A-7

36. Design and Use of Life Cycle Cost Models for the

Planning and Acquisition of Federal Space A-8

38. Design of Federal Procurement Experiments for

Improved Health Care Delivery A-9

40. Design of Three Federal Procurement Experiments

by Booz-Allen A-10

41. Design of Additional Federal Procurement

Experiments A-11

42. Designing and Testing a Systematic Procedure for

Implementing Federal Procurement Experiments A-12

58. Automobile Tires A-13

59. ADP Ribbon Procurement Experiment A-14

60. Public Market Aggregation as an Incentive for

Technological Change A-15

61. Biomedical Monitoring Systems Procurement

Experiment A-16

62. Blood Tubes Procurement Experiment A-17

63. Internally-Oriented Life Cycle Costing Program

for Federal Purchasing A-18

64. Value Incentive Con'cracting Program for

Federal Purchasing A-19

70. Payment of Costs Incurred by the Federal Supply

Service in Providing Background Information and

Conducting Preliminary Studies on Potential ETIP

Projects A-20

71. Cleaning Agent Experiment A-21

72. Charles C. Travis - Technical Assistance to

the Procurement Policy Area of ETIP A-22

73. Oscilloscopes A-23

75. Systematizing Local Procurement as the

Preface to Technological Change A-24

80. Systematizing the Design Development and Use of

Incentives in the Procurement of Medical

Equipment and Supplies A-25

81. Design for Federal Procurem.ent Experiments for

Improved Health Care Delivery A-26

i
2

. Page

82. Office Copier Experiment A-27

REGULATORY AREA:

8. Analysis of the Dynamics Underlying Regulatory

Changes Having Significant Effect on Innovation A-28

31. Refrigerated Rail Transport Experiment A-29

44. Design and Analysis of Regulatory Experiments - Narrow Scope A-30

45. Design and Analysis of Regulatory

Experiments - Broad Scope A-31

47. Accelerating the Establishment of Standards and

Their Adoption as Regulatory Guides by the former

Atomic Energy Commission A-32

48. An Experiment in the Regulation of Pesticides A-33

76. Experiments in Computer Applications

for Regulatory Agencies . , A-34

85. Using Technology to Increase the Information

and Decrease the Time for the Regulatory Process .... A-35

95. Evaluation of ETIP/NRC Standards Development Project A-36

CIVILIAN R&D AREA:

7. Flammable Fabrics Research A-37

11. Analysis of Federal Demonstration Projects A-38

13. Diffusion of University Research Output A-39

19. Federal Funding of Civilian Research and

Development A-4 0

67. (Modular) Integrated Utility System A-41

87. Management of Federal Civilian Research

and Development Programs A-4 2

96. Real Time Case History of ETIP Project #67

(Integrated Utility System) A-43

SMALL TECHNOLOGY-BASED FIRMS:

9. Analysis of Imperfections in Capital Markets A-44

27. Evaluate Small Firm Business Potential A-45

28. Assisting Small Firms Required by Regulation

to Undergo Technological Change ... A-46

32. Connecticut Product Development Corporation A-47

46. Technical Competency Evaluation A-48

77. Symposium on Assistance to Small

Technology Based Firms A-49

78. Data Collection, Summarization, and Interpretation

for ETIP Project with Connecticut Product

Development Corporation A-50

79. Survey of Five-Year Results of Innovation

Loan Program A-51

PLANNING AND RESEARCH AREA:

17. Contingency Planning for Anticipated Technological

Crises A-52

94. Evaluation of ETIP Program , A-53

ii
EXPLANATION OF MILESTONE SYMBOLS

J^- Completed milestone

A- Incomplete milestone

Postponed milestone

A Postponed and completed

milestone

PROCUREMENT AREA

1. Power La^sTimower Exoerir.ent

Purpose : To determine if federal procurer^.ent , through the use

of perforr.ance specifications, can provide i.ncentives to industry

to develop new technolocy that vrill reduce noise pollution in

lawnrr.overs

.

Milestones

1. 5^teae=£ of AaqoXraeastJ i to proc=reneat

2. sr? :ss9e4

3. Bid Cocfrrt^c*

4. Pr=?o«*l«

C. m'm XM3*<d

7. Bids AAAl/zed

• Cootrace Aa**xd

9. Prepro. T«iu Caaplat«4

L2. DelLv«rr Starr

I A

A

A

J k t 'O t D J T » k » 3 |jiip«BJrBillJ

A

A

1 A

' A

Progress : This project has been delayed because of two factors:

1) The FSS Legal ruling questioning the paynent of a premium for

noise reduction. They claim this can only be done when a noise level has been certified by EPA.

2) The attem.pt by the FSS Ft. V7orth regional office to include

the lavrnm.owers in this experiment in their IFB for lawnmcwers

and aarden equipm.ent.

With respect to the first problem, (FSS Lecral ruling) arrangem.ents

are beina m.ade to have FSS and EPA attorneys resolve this issue.

The power mowers to be procured in this experiment have been

removed from, the Ft. V7orth I.'^B. A letter was mailed to lawnmower manufacturers briefly outlining

the proposed specifications and asking them to advise if they

would be interested in subm.itting a technical proposal. This

is not to be construed as the first step of a tv;o step proposal.

It v;as m.erely an attempt to determine industry reaction before a formial RF? was issued. In con junction with this letter to the

manufacturers, we for^'/arded an article explaining ETIP to the

Outdoor Pov;er Equipmient Institute so they could publish it in

their trade journal. Four firm^s responded positively while

others suagested the experim:ent be delayed pending issuance of

safey standard by CPSC

.

A-1
2 . Window Air Conditioner Experiment

Purpose : To determine if a reduction of energy consumption can

be achieved through performance specifications.

Milestones

FY 75 FY 76

1. Statement of Requirement

2. Evaluation of Bid Formula

3. Criteria for Evaluation of Proposals

4. Invitation for Bids

5. Bids Received

6. Awards Made

7. Contract Effective

8. Procurement Evaluated

9. 3rd Procuremeot Planned

A-A

A—

A

.lASONDJFMAMJ

AA

AA

A

A

A

A

Progress : The first procurement cycle has been completed and one

year contracts were awarded for the period, November 1, 1974

through October 31, 1975. The annual usage was estimated at

27000 units. The key elements of this award were:

• Contracts awarded to General Electric (est. contract value - $2,533,000) and to Fedders Corp. (est. contract value - $3,980,000)

• Average 21% reduction in energy consumption over those units

purchased last year.

• Estimated net savings of $400,000 over the expected

seven year life of the units.

IFB's for the second procurement were scheduled to be issued in

July but were rescheduled for August necessitating a change in the

schedule for Bids Received. Industry suggested to Procurement to

issue the IFB a little later than usual to take advantage of new

models for the coming year. The IFB's for the second procurement

are being printed.

The Industry Survey for the first procurement was completed and

has been issued. Major findings were:

• Insufficient lead tim.e to develop new technology.

• Significant amount of paperwork was cited most frequently as the reason for not bidding.

• Industry favored the use of LCC in the procurement of

air conditioners.

• Efficient room air conditioners are generally quieter

than low EER models.

• Indefinite number of units was considered a problem by the manufacturers.

A2
3 . Frostless Refrigerator Experiment

Purpose : To determine if a reduction of energy consumption can

be achieved through performance specifications.

Milestones

:

1. Establish performance

elements t, forward for comments

2. Pre-Bidders conferences

3. Revise statement of requirements

4. Prepare invitation for bids

5. Issue invitation for bids

6. Bids received

7. Bids evaluated

8. Awards made (contract effective)

9. Preproduction sample

10. Procurement evaluation

11. 3rd procurement planned

J F M A M J

A

AJASONDJFMAMJ

-A

A-A

AA

A-A

A

A

A

A.

Progress : The first procurement cycle has been completed, and one

year contracts were awarded to Philco-Ford ($421,000); General

Electric ($2,611,000) and Hotpoint ($1,269,000). The estimated

annual usage was 14,300 units. No savings were realized as the

low LCC bidder was also the low bidder. Another factor was the

absence of bidders (Hotpoint, G.E. and Philco-Ford). The contract

award to G.E. was protested by Philco-Ford because they felt

G.E. overstated the efficiency of their units. Testing of the

refrigerators has been com.pleted and we are awaiting a resolution of the protest by GAO.

The second procurem>ent cycle has been started and a milestone

slippace has occurred with entry #3 "Revise Statement of Requirements" (specifications) . The "Statement of Requirem.ents " has

been sent to Natick Labs for their comm.ents which are not expeci.ed

until the second week in August. This slippage also caused

a change in milestones #4, #5, and #6.

An Industry Survey has been started with Philco-Ford as the first

firm to be visited during the v^eek of 8/11/75. The objectives of

the survey are:

• To determine industry attitude toward the procurement and

to identify potential bidders.

• To determine from the winning bidder how new technology

procured by the Government will be transferred to the

consumer

.

• To obtain sales figures from the companies visited to assist in development of the market environment.

• To gather information about the state of technology.

In cooperation with the Appliance Labeling and Energy Efficiency

Programs at NBS , the Industry Survey will also include questions regarding these two programs.

A3
4 . Home Water Heater Experiment

Purpose : To determine if a reduction of energy consumption

can be achieved through performance specifications.

Milestones : Milestone chart for second procurement being

developed.

Progress : The first procurement cycle has been completed and a one year contract was awarded to A. 0. Smith ($817,000) for an

estimated 7700 water heaters. The contract covers the period

February 1975 through January 1976. The key elements of the

award were:

• One of the leading manufacturers in the country, A.O.

Smith, bid for the first time.

• Average 11% reduction in energy consumed over units which

would have been purchased using low bid approach.

• Estimated net savings of $326,000 over the expected 10

life of the units.

• Gas Heaters sold in France previously will now be marketed

in the U.S. by A. 0. Smith as a result of this contract

award.

An industry survey will be conducted in August and September with

the following objectives:

• To determine industry attitude toward the procurement and

to identify potential bidders.

• To determine from the winning bidder how the new technology

procured by the government will be tranferred to the

consumer. | • To obtain sales figures from the companies visited to

assist in development of the market environment.

• To gather information about the state of technology.

In cooperation with the Appliance Labeling and Energy Efficiency

Programs at NBS , the industry survey will also include questions

regarding these two programs.

A4
5 . Household Ranges (Electric) Experiment

Purpose : To determine if a reduction of energy consumption can

be achieved through performance specifications.

Milestones

:

FT 75 rJ /O

J A S . 0 H D J P N A N J J A 8

1. statement of Requlrenanta

2. Evaluation of Bid Pomula

3. Invitation for Bids laaued A

4. Bids Received A

5. Bid Sample Evaluation AA

6. Awards Hade A

7. Contract Effective A

8. Procurenent Evaluated

9. 2nd Procurement Planned

Progress : The first procurement cycle has been completed and contracts were awarded to Sunray Stove ($549,000) and General Electric

($178,000). The contracts were effective in July, 1975, and will

run through June, 1976. Total estimated annual usage is 3720 units.

The key elements of the award were:

• Average 7% reduction in energy consumption over units which

would have been purchased using the low bid approach.

• Estimated net savings of $121,000 over the expected 12 year

life of the units was realized.

An industry survey will be conducted in August and September with

the follov/ing objectives:

• To determine industry a':'-.itude tov^ard the procurenent

and to identify potential bidders.

• To determine from the winning bidder how the new technology procured by the government will be transferred

to the consumer.

• To obtain sales figures from the companies visited to

assist in development of the market environment.

• To gather information about the state of technology.

In cooperation with the Appliance Labeling and Energy Efficiency

Programs at NBS, the industry survey will also include questions

regarding these two programs.

A5
5 . Household Ranges (Gas) Experiment

Purpose ; To determine if a reduction of energy consumption can

be achieved through performance specifications.

Milestones

:

FY 76 TP

1. Statement of Requirements

2. Invitation for Bids

Issued

3. Bids Received

4. Bid Sample Evaluation

5. Plant Facility Evaluation

6. Contract Effective

7. Procurement Evaluated

3rd Procurement Planned

JASONOJFMAMJ,

A

A

A

A

A

A

Progress : The first procurement cycle has been completed and

one year contracts were awarded to Sunray Stove ($1,400,000);

Roper Sales ($2,151,000); and Crown Stove Works ($982,000). The

contracts cover the period of February 1, 1975 through January 1,

1976, and were for a total estimated usage of 22,200 units. The

key elements of the award were:

• Average 7% reduction in energy consumption over units

which would have been purchased using the low bid approach.

• Estimated net savings of $619,000 over the expected 12

year life of the units was realized.

Studies by the Northern Natural Gas Company and American Gas

Association indicate pilot lights consume between 30-50% of all

energy consumed by the range. In view of this we are attempting

to revise the LCC formula to include a factor for pilot efficiency:..

We are also sending a letter to industry seeking information

regarding gas range technology.

State procurement groups do not purchase commercial gas ranges,

therefore, our idea of sending out a joint NASPO/FSS/ETIP letter

has been discontinued for this product.

An industry survey will be conducted in August and September with

the following objectives:

• To determine industry attitude toward the procurement

and to identify potential bidders.

• To determine from the winning bidder how the new technology procured by the Government will be transferred to

the consumer

.

e To obtain sales figures from the companies visited to

assist in development of the market environment.

• To gather information about the state of technology.

In cooperating with the Appliance Labeling and Energy Efficiency

Programs at NBS , the Industry Survey will also include questions

regarding these two programs.

'»»TMM*TM»«~TTirrMi
29 . Symposiura - Federal, State, Local and Industry

A) January 19 75 Symposium

Purpose : To open government/industry dialogue on ways to

encourage technological innovation in products purchased

by the Government.

Ililestones

FY 76

J A S 0 HDJFMAMJ

1. Distribute Syrispoaiuit A-A Report

2. Prepare report to attendees Indicating action taken A

regarding workshop

recorr^endations Progress : The Report for the January Symposium has been submitted to Special Services for printing. In view of the

number of impressions required (80,000) the Report was forwarded

through channels to GPO for printing. GPO has subcontracted

the printing of the Report to a private firm, and we have been

informed delivery has been promised for 9/1/75.

B) October 1975

Purpose : Government, Hospitals, and Industry - a joint effort

toward technological innovation in product and systems development - to meet hospitals ' demands and to provide industry

incentives for the benefit of all who deliver and require health

care

Milestones

JASONDJFMABJ

1. Program to printing

2. Mail invitation AA

A

A

A

A

A

3. Reply to invitation

4. Second nvalling (if necessary)

5. Reply to second nailing •

6. Syr-posiun Progress ; The Symposium Program was scheduled to go to printing

July 15 but was delayed because of our attempts to obtain Congressman Paul Rogers as keynote speaker. Congressman Rogers has a prior

speaking enegagement and cannot be our keynote speaker. A letter

has been sent to Senator J. Glenn Beall of Maryland requesting him

to be our keynote speaker.

• The Symposium Program has been printed, and was delivered

to us on 8/15/75

• The invitation letters will be mailed out on 8/15/75 with

a response date of 9/15/75

• The invitation letters to the proposed co-chairmen have

been mailed.

A-7
36 . Design and Use of Life Cycle Cost Models for the Planning

and Acquisition of Federal Space

Purpose : To develop and test a Life Cycle Costing Model for

space acquisiton and provide a forum for the introduction and

evaluation of technological innovation in the construction

industry.

Milestones:

FY 75 FY 76

J ? M A M J J A S 0 N 0 J F M A M

1. Completion of "Macro

Model" A

2. Analysis of Building

Systems A

3. Data Collection A

i. Development of Detailed

LCPB Model A

s: Preliminary Tests and Model Refinement A

c. Expansion of Model to Facilitate Planning and Budgeting A

7.

8.

Final Validation of the Life Cycle Costing Model

for space procurement

Report Preparation

A

A

Progress : The concepts, formulas and software relating to the

life cycle model of space procurement has been developed

and presented to PBS on July 21. This model will be tested,

manually at first to establish certain accuracies of the

building parameters chosen. After initial tests the model

will be applied to three building situations over the next

several months:

(1) A fictionalized site in Alexandria using the parameters

of the Crystal Mall buildings so comparisons can be made,

(2) A real on going space procurement in Tallahassee, Florida,

of about 200,000 square feet, and

(3) An actual procurement of space in Madison, Wisconsin.

GSA/PBS feels that in about 6 months the project will be ready

for a major publicity campaign.

A-8
38. Design of Federal Procurement Experiments for Improved

Health Care Delivery

Purpose : To provide for the design of plans for seven

to ten projects for implementation by the Veterans

Administration. The knowledge and experience gained

from these and other procurement experiments will

provide a data base for determining whether government

procurement actions can stimulate socially or economically desirable technological change.

Progress : This project ended on June 30 after a one year

contract with Ross Hofmann Associates. Twelve product

write-ups for procurement have been prepared and

delivered to VA for implementation as required. This

contractor effort has been continued as ETIP project 81

for 18 months.

A4 0 . Design of Three Federal Procurement Experiments by

Booz-Allen

Purpose : To design three additional experimental procurement

plans for implementation by FSS.

Progress : Three experiments have been submitted:

(1) Biomedical Monitoring Systems

(See project #61 for status)

(2) Blood Tubes Procurement Experiment

' \ • (See project #62 for status)

(3) Oscilloscopes

(See project #73 for status)

Project has been completed.

A-10
41. Design of Additional Federal Procurement Experiments

Purpose : To design three experimental product related

procurement plans for implementation by FSS

Milestones

J ASONDJPMXMJ

1. Fire Retardant Paints A

2. Warranties A

3. Project Completion A

Progress : Experiment plans are being prepared for fire retardant

paints and warranties. A discussion paper on warranties was

prepared by Booz-Allen listing alternatives for an experiment

with warranties and also stating the major issues. It was

decided that we have very little FSS data on warranties and felt

a study should be conducted which would result in procurement

experiments. We have asked Booz-Allen to design a warranty

study in lieu of an experiment plan for FSS/ETIP to conduct.

In order to do this the Booz-Allen contract must be amended and

we are in the process of necrotiating this amendment with BoozAllen.

The third experiment to be furnished under this project has

been completed. See Office Copier Experiment (#82) .

A-11
42 . Designing and Testing a Systematic Procedure for

Implementing Federal Procurement Experiments

Purpose : To identify, experiirient with, and assess alternative

means for regularly and routinely evaluating and ranking

product change suggestions as the basis of market needs and

costs and to explore other incentives.

Milestones:

FY 76

J ASONDJFMAMJ

I. RFP sent out

2. Bidders Conference

(Washington, D.C.) A

3. Bidders Conference

(L.A.

)

A

4. Bid due date A

S. Contract awMrd date A ..

Progress : RFP has been issued and all bids are due 8/11/75.

ETIP is represented on the Proposal Evaluation Panel and also

the Steering Comjiiittee which v;ill guide the project after a contract has been awarded.

A- 12
58. Automobile Tires

Purpose : To revise Federal Supply Service policy for purchase of

new tires to reflect the results of fuel consumption testing

conducted by FSS between bias ply, belted bias, and radial tires.

To make available the results of such FSS testing in the

consumers pamphlet series of publications issued by

Federal Supply Service as an incentive for new technological innovation.

Milestones

FY 76

J A S 0 N D J F H A M J

1. ETIP approval A

A

A

2. Contract award

3. Road test start A

A

4. Lab test start

5. Evaluation and analysis

«. Pamphlet draft A

A

A

7. Revision and approval

S. Publication Progress : Project plan was submitted to the staff for

comment. It was subsequently rewritten to reflect their

comments and submitted to management for approval. It

has been returned for additional information.

A-13
5 9 . ADP Ribbon Procurement Experiment

Purpose : To test the use of Life Cycle Costing (LCC)

or performance specifications as a means to stimulate

new technology.

Milestones

:

1. Establish performance elements,

(completed 2/74)

2. Determine reliability tests, (completed 8/74)

3. Develop statement of requirements,

(completed 8/74)

4. Develop contract provisions,

(completed 12/74)

5. Circulate proposal for industry

review and comments.

6. Forward solicitation to contracting officer (NY)

.

7. Issue IFB.

8. Test bid samples.

9. Award contract.

10. Evaluate procurement.

11. Plan next procurement.

FY 75 FY 76 JASONDJFMAMJ JASONDJFMAMJ

A --A

A- -A

A---- -A

A--- A

A- ^A

Progress ; Funciing constraints delayed definite quantity

procurements. Authorization from FSS management was

obtained in May, 1975 to proceed with this experiment as a

definite quantity procurement. The statement of requirements and usage information has been forwarded to FSS

Procurement for issuance of an IFB.
60 . Public Market Aggregation as an Incentive for Technological

Change

Purpose : To develop, test, and implement a national system

to encourage technological change through the combined use of

Federal and State purchasing power. Included in this system

will be the continuous development and exchange of incentive type

procurement specifications (e.g., performance specifications, life

cycle costing, value change proposals, and test methods) among

and between State government agencies and the Federal Government.

Milestones

nc 75 rv 16

1. Project started

2. Regional tneetlngs

3. Product task forces

4. Battelle study on 9' products

5. A/C spec developed

«. A/C IFB Issued

7. Othor product IFB's issued

8. Information system

framework

9. Procurement policy atudlas

and analysis

10. Marketing studies coDplatad

11. Procurement •valuation

12. Pinal raport

J F M A M J A

J.ASONOJPMAMJ

A

AAAAA

A

AA

Police Radios Hater Coolers

nof rignrators ADP Printar Tap*

Cut Papar

Othara

Progress ;

• Regional meetings held to start project and select

candidate products - 65 products

• Battelle product studies initiated.

• Product area task forces established. Electrical Products,

Mechanical and Automotive Products, Communications Equipment

Furnishings and Textiles, Medical and Scientific Equipment and Miscellaneous.

• Framework for Nationwide Purchasing Information System

developed - NIGP, NBS, FSS and others to participate.

• A/C spec being reviewed by states prior to procurement.

• Eight additional specs due for State review by November

and subsequent procurement.

A-15
61 . Biomedical Monitoring Systems Procurement Experiment

Purpose : To gain experience in the use of procurement as a

stimulant to desirable technological change.

After review of the Booz-Allen project plan, the procedure

described therein was found to be undesirable. We have

decided to incorporate this into Experiment #38, canceling

this project.

A-16
62 . Blood Tubes Procurement Experiment

Purpose : To gain experience in the use of procurement as

a stimulant to desirable technological change.

After review of the Booz-Allen project plan, the procedure

described therein was found to be inadequate. We have

decided to incorporate this into Experiment #38, canceling

this project.

A-17
63, Internally-Oriented Life Cycle Costing Program for Federal

Purchasing

Purpose : To develop and implement workshops and training seminars

for FSS procurement personnel to develop a working knowledge and

basis for formalizing life cycle costing in government procurement.

Milestones

:

FY 75 rv 78

1. Prepare, issue, and award contracts for workshopB

and workbook.

2. Conduct first LCC Workshop.

3. Conduct second LCC Workshop.

4. Prepare, issue, and award contracts for case studies

and technical advice.

5. Develop product procurement

piaiiu.

6. Prepare FSS internal LCC training capability.

7. Begin FSS presentation of

LCC Workshops.

8. Issue LCC brochure to Federal agencies.

9. Document and issue LCC cases

.

10. Brief industry groups on LCC objectives.

11. Complete FSS presentation

of LCC Workshops.

JASONDJPMAMJ JASONDJFMAMJ

A

A

A

A

A

A

o Th4.a will be a continuing effort. Progress : Two LCC Workshops (five day courses) were conducted

in December, 1974 and January, 1975 with approximately 15 FSS

personnel attending each course. FSS training personnel also

attended to prepare for future presentation of LCC training courses

at the 10 Regional Centers. An executive orientation session

(four hours) was also conducted during the second workshop and

approximately forty FSS executives attended the session. Ten

products were selected in the two workshops as potential candidates for LCC. Status report of these products is attached.

Training personnel at FSS plan to conduct fourteen forty hour LCC

workshops during fiscal year 1976. The schedule for these workshops

is as follows:

Location Date

Atlanta

Central Office, Washington, D.C

Chicago

Seattle

New York

Central Office, Washington, D.C

Washington, D.C

Central Office, Washington, D.C.

San Francisco

Central Office, Washington, D.C

Kansas City

Fort Worth

Denver

Boston

September 8-12, 1975

September 22-26, 1975

October 20-24, 1975

October 20-24, 1975

November 17-21, 1975

December 1-5, 1975

December 8-12, 1975

January 26-30, 1976

February 16-20, 1976

March 22-26, 1976

April 5-9, 1976

April 5-9, 1976

May 10-14, 1976

May 17-21, 1976

A-18
Purpose : To develop the basis for institutionalizing the use

of Value Incentive Clauses (VIC) within FSS, to develop a series

of government/industry seminars to implement the program and to

establish and coordinate internal processing procedures.

Milestones

FY 75

1. Insert VM Clause in all approved contracts over

$100,000.

2. Prepare, issue, and award contracts to:

a. Develop program for and assist in 10 industry/govt

conferences

,

b. Prepare materials

needed for completion

of two 20 min. video

tapes.

3. Complote program development for industry/govt

conferences

4. Complete two video tapes.

5. Conduct industry/govt. conferences

Boston

Now York Washington

Atlanta

Chicafjo

f. Kansas City

g. Fort Worth

h. Denver

San Francisco

,\uburn, Washington

J P H A M J

A

A

JASONDJFMAHJ

A-A

A

A

k

Progress : A GSA order has been issued covering the implementation

of the contractual part of the Value Incentive Clause program.

The order states that this clause shall be included in all

advertised or negotiated definite quantity, and requirement

solicitations that:

a. Contain item descriptions which reference Federal Specifications, Interim Federal Specifications, Military Specifications

drawings, or purchase descriptions developed within GSA.

b. May result in contracts exceeding $100,000. At the discretion

of the procurement divisions directors, this clause may be use

in solicitations which are estimated to result in contracts

of less than $100,000. The clause will not be used in solicitations for Multiple Award Federal Supply Schedules, basic

ordering agreements, research and development, testing, service or maintenance contracts.

The draft of a federal regulation which will be issued to all

federal procurement agencies requiring the use of VIC has been

prepared and is being reviewed.

A-19
70 . Payment of Costs Incurred by the Federal Supply Service

in Providing Background Information and Conducting

Preliminary Studies on Potential ETIP Projects

Purpose : To provide FSS with funds to cover costs

incurred in developing the background information needed

prior to the development of ETIP project plans.

Milestones ; These funds remain available until expended

which was estimated to be about one year. Funds tranferred

in June , 1974

.

Progress : As of this date, charges totaling $22,700 have

been accumulated against this project.

In May, 19 75, invoices received from FSS for this and other

projects were returned to them unpaid for lack of information.

FSS was informed that we would not approve invoices for payment

until proper documentation was furnished. FSS has reviewed their

records, corrected the invoices and resubmitted them for

payment. As of this writing, we have not received the corrected

invoices

.

A-20
71 . Cleaning Agent Experiment

Purpose : To test the hypothesis that an item can be procured

on a performance/cost effective basis and that improved

cleaning agents used by the covernment will diffuse into

the general marketplace more rapidly than would otherwise

occur

milestones

TX 75 PY 7« rv 77

1, Conduct Marketing

and Market Research

2. Collect Procurement

History Data

, 3. Establish Perfor- mance Elements

4. Hold Pre-Blddera

Confnrrnco

5. Devise Statement of Requirements

6. Issue Request for Proposal

7. Proposals Receivad

8. Proposals Evaluated

9. Issue Invitation

for Bid

10. Bids Received

11. Bids Evaluated

12. Awards Made

13. Effective Date of Contract

14. Conduct Marketing

15. Complete Procurement Evaluation

JASONDJFHAMJ

A

AA

AJA30NDJPNAMJ

rAA

A

A

J A 8 0 H D

A

A

A

Progress : The Materials Evaluation and Development

Laboratory at FSS evaluated eight cleaning efficiency

test methods submitted by industry. Five methods were

chosen for further evaluation, and subsequently reduced to

two test methods.

Testing to evaluate these two methods has been completed

by the Materials Evaluation and Development Laboratory

of FSS and a report of their findings is being prepared.

As of this date, the report has not been completed hence

the slippage of milestone #3.

Procurement history (annual usage) has been collected.
72. Charles C. Travis - Technical Assistance to the Procurement

Policy Area of ETIP

Purpose : To provide coordination, analysis and interin evalu-tion

on the procurement experiments, to provide critique, commentary,

and guidance to the procurement policy experiments and to maintain

liaison with industry as the experiments proceed.

Milestones : n u

'

J ASONDJPHA N J

1. Review 160 & 75

2, Rsvisw othsc 3*jGncy Technology Transfer Programs AA

3. Review other agency spec

and procurement policies ( apply to projects 60 i 75 A

4. Develop total conceptual

framework of government

purchasing

A

5. Provide commentary & critique on current projects .-A

6. Review studies related to transfer barriers t, apply

findings to projects 60 ( 75 aa possible experiments

A

7. Assist in monitoring ( directing 160 i ?5 --A

8. Asslt In Development Infor- mation System --A

9. Final Report A

Progress : Meeting to discuss interrelationships between NIGP and NASPO

projects, the deficiencies in project scope, method of

implementation and progress to date.

Meeting on July 2 9 with representatives from ETIP, NIGP, NASPO,

and FSS. The meeting resulted in the identification of initial

tasks, the establishment of a task group and the general

recognition of the scope and complexities of developing an

effective and self supporting system.

Developed a framework for discussion with ETIP staff and further

development as necessary. The framework identifies the elements

which should be included in projects when the contractor has

no directional authority.

Also, various reports have been reviewed in the context of

projects #60 and 75.

A-22
73 . Oscilloscopes

Purpose : To test the effectiveness of a user-manufacturer

feedback system in encouraging technological innovation.

Milestones

n 76 JASONDjrHAHJ

1. D«cliion to incorporate

project Into H2. A

Progress : This project is being held and will be reviewed

to determine if a feedback system for products on multiple

award schedules can be developed under the Umbrella Project

(#42).

A-2 3
75 . Systematizing Local Procurement as the Preface to

Technological Change

Purpose : To test through experiments and analysis, the effects

of local purchasing power in stimulating innovation through

the application of new procurement policies and practices.

Milestones rv 76

1. Develop Detailed Phase I Plan

2. Design Information Gathering Techniques

3. Test Collection Procedures

Revise as Required

i. Gather Data- . : ^

'

5. Summarize/Categorize Data

6. Analyze t Develop

Tentative Conclusions

7. Conduct Verification

Field Visits

6. Develop Detailed Phase II Plan

9. Quarterly Briefings

JA80NDJFNAMJ

A

A

A

., ^v., Am. : A

A

A

A A A A

Progress : Contract signed and effective June 24, 1975.

NIGP staffing up, enlarging quarters and developing administrative and reporting procedures.

NIGP participated in a meeting on July 29 at NBS and contributed

to the design of a state and local procurement information

system.

RFP for subcontract to NIGP for consultant assistance in system

development prepared and reviewed by ETIP. New version ready

for advertising after clearance from DOC contracting officer.

NIGP prepared and mailed letter to its membership explaining

ETIP project and soliciting cooperation.

NIGP provided ETIP with booth space at its annual conference

and product exposition to be held in Philadelphia from

September 2 7 thru October 1.

A-24
80 . Systematizing the Design Development and Use of Incentives

in the Procurement of Medical Equipment and Supplies

Purpose : To continue to design and develop procurement

plans relating to medical equipment and supplies, to

provide initial support to the experimental procurement

function at VA, to coordinate joint procurements between

Federal, State and local purchasing groups and to provide

the necessary liaison to industry.

Milestones

FY 76

J A S 0 N D J F M A H J

1. Project initiated

2. AHA Show participation

3. Medical Symposium A

4. Project staff recruited A

5. Specs reviewed by VA services A

6. Specs reviewed by Industry/ Private User A

7, First procurement issued A

Progress

• Funds transferred to VA and project initiated in August.

• Recruitment for projected VA staff underway.

• Participation in annual AHA Show to promote program

and obtain user and industry input to new concepts in

procurement

• Specifications for 12 products in review and comment

phase by VA.

• Procurement Symposium for Medical Equipment and Supplies

set for October 14-16, 1975 at HBS

A-25
81 . Design for Federal Procurement Experiments for Improved

Health Care Delivery

Purpose: To continue to design and develop procurement plans

relating to medical equipment and supplies, to provide

initial support to the experimental procurement function at VA,

to coordinate joint procurements between Federal, State and local

purchasing groups and to provide the necessary liaison to industry.

Milestones:

FY 76

J A S 0 N D J F M A M J

1. Project started

2. MIA Show A

3. Final 12 specs completed

A

4. Revise if necessary A

5. Symposium A

6. Evaluation of procurement

starts A ,

7. Public Health Show A

Progress :

• Phase II project underlay, July 1, 1975.

• Preparation for and participation in AHA Show.

• Assistance in selecting Symposium Workshop chairpersons,

developing invitation list and developing workshop

topics

.

• Preparation of final specifications for VA service

review and implementation.

• Review of additional products for spec development

prior to discussions with VA. Include markets, technology,

user needs and so on.

A-26
82 . Office Copier Experiment

Purpose : To test the effectiveness of a state copier procurement managment system in stimulating innovation.

Milestones

fr 7«

J A S A

OHDjr«A«J

1. Freient plan to HASPO

2. Acceptance by itate A

3. lapleAentation A

Progress : A preliminary plan was developed by Booz-Allen and

presented to FSS managment and the ETIP staff for comment. The

Commissioner of FSS eventually concluded that the plan was sound

but he did not have the resources - specifically manpower - available to do the project properly. The project plan was

then converted from Federal to the State procurement level. The

project plan will be sent to I'JASPO in August for their comments.

A-27
>. .' . '

'

\

''. is ",

' A. lif'
REGULATORY AREA
3 . Analysis of the Dynamics Underlying Regulatory Changes

Having Significant Effect on Innovation

Purpose : To gain a fuller understanding of the forces which

have historically been responsible for prompting changes in

regulations which have had a significant effect on technological

innovation.

Milestones

:

6. Final Report

FY 7S FV 7 6

1. Contract Awarded

2. Project Initiated

3. 50-75 Caeclete Coopleted

^. Cases Selected for Deeper Review

5. Draft Report, Includes Caselets, Deeper Analysis in Selected Cases, Conclusions

JASONDJFKAMJ

A

A

A

ONDJFMAMJ

A

Progress : This project is a collection of case studies which

will analyze the processes and procedures which were involved in

the change (or the proposed change) in regulations which have

had (or would have had if adopted) a significant effect on innovation. Particular attention will be paid to where and when

the idea for the change occurred, the nature of the process

used to make the change, who the parties were who participated

in the process and what their respective interests were, the

nature of the evidence presented, and so on.

The purpose of the study is to gain insight and documentation

with respect to the political forces leading to changes in regulations. This is deemed an important contribution to any effort

which would be used, on an on-going basis, to provide the maximum

responsiveness of regulation to economic and technological needs.

The firm of Charleswater Associates has contracted with ETIP to

conduct the project. The first stage of their effort will be

to generate brief outlines of between 50 and 75 cases. At this

stage the above questions will be answered with only a sentence

or so. The cases selected will represent a variety of types of

regulations and, within each type, several different forms of proceedings. From these caselets some preliminary conclusions will

be sought. Additionally, they will form the basis for selecting

10-15 cases for deeper analysis.

A-28
31. Refrigerated Rail Transport Experiment

Purpose : To develop and implement new regulatory practices and

provide increased incentives for investing in refrigeration technology for railroads.

Milestones n 7 5

1. Coacracc Awarded

2. Project taldaced

3. Part One - Nature of Perishable

Foods ladustrj, lacludlng Production, DlscributloQ and

H<rlLecliig

4. Part Two - Cosaodlty ?1ovb, Traasportatioa Cbaracterlscica

aod Costs, Recoaaeaded Setvork

5. Pare Tbree - Loslscicf Aaalysla

and RecoaaendatloD

C. Part Pour - ATallabla Tech- aologlea

7, Opaft ?lsal Report

I. rioal lapore

JASOSDjrMAKJ JASiOSDJ rWAKJ

A

A

A

A.

Much of the current assault on economic regulation is based on the

untoward and uneconomic results which have stemmed from it rather

than from its inherent structure. The thesis of this experiment is

that a considerable amount of these troubles has arisen from an

inability of the regulatory process to examine with detail and sophistication the cost structure of the industry under regulation, v;ith

the result being that the cost and benefits are so dislocated that

the entire system becomes highly inefficient. Thus this project is

examining a particular cost and logistics structure in an effort to

see if that information can successfully be used to structure the

regulation which allocates the costs and benefits, so that the

industry responds to the market rather than to the artificial constraints of regulation.

The particular topic of the experiment is transportation of fresh

fruits and vegetables from the V7estern growing regions to the

markets of the east. It will generate an extensive amount of information about the way they are grown, processed, transported, distributed, and marketed in an effort to determine the various costs and

benefits of alternative systems. That information will then be used

in the regulatory process in proceedings before the Interstate

Commerce Commission.

This project is being run in cooperation with the Federal Railroad

Administration of the U. S. Department of Transportation. For

several reasons, it has been delayed about one year from the time it

was originally anticipated that work would be underway. However,

a contract has now been awarded to the firm of Manalytics, Inc.

An organizational meeting will be held shortly.

A- 2 9
44. Design and Analysis of Regulatory Experiments - Narrow Scope

Purpose: To provide design, analysis and consultation in the preparation of six narrow scope regulatory experiments.

Milestones

:

1. Contract Awarded

2. Potential Experimental

DeelgnB Nominated

3. EiperlmentB Selected for Preparation of Full Design

*• Exoerlment nesiann Produced

[1 every alx waaka] [Revised to on* *v#ry

three wesksl

FY 74 FY 75 FY 76 JASONDJFHAHJ JASONDJFHAKJ

AA

ETIP would like to generate a wide variety of well researched and

comprehensively developed projects. However, the amount of staff

time available for these efforts is necessarily limited. But even

if it were otherwise, there is merit in securing the views of

people who are active in the area of regulation but who are not

employed by the Government. Thus ETIP let two contracts for the

design of six potential experiments. Under these contracts, the

contractor is responsible for: developing a conceptual framework

from which to work; a list of potential experiments which the contractor feels would be suitable for ETIP to conduct with another

agency; and, after discussions with ETIP, six of these nominees will

be selected and a full experimental design will be prepared for each.

In addition, the contractor will be responsible, on a task order

basis, for providing consultation services to ETIP.

The first of these contracts focuses on regulatory agencies which

affect a limited, or narrow segment of our economy, such as transportation or energy supply. The firm of Gellman Research Associates

was awarded this contract by ETIP. On the consultation side of the

contract, they have prepared a survey paper entitled "Regulation,

Competition and Innovation in the Common Carrier Communications : Industry." On the experiment design side, forty potential areas

were identified and discussed. This list was narrowed to fifteen,

and a brief description of each of the fifteen was prepared. From

this collection, the following six were selected:

• Peak load pricing in electric utilities

• Guidelines for cost/benefit analysis by regulatory agencies

• Railroad rates which would cover transportation only, with

additional charges for ancillary services

• Permit and encourage a differential rate for containers on

flat cars and trailers on flat cars if there is a difference

in the cost of providing the service

• An experiment with respect to airline service (specific topic

to be determined)

• Given the present structure of the telephone industry, ways

to ensure a maximum amount of beneficial technological innovation.

A-30
45. Design and Analysis of Regulatory Experiments - Broad Scope

Purpose : To provide design, analysis and consultation in the preparation of six broad scope regulatory experiments.

ft H ' n 11

J J ASONDjrHAHJ J A S

I. Contract Awarded

1. ttft en I«(ul>torT Iituci A

A-A

i, Fet«atl«l Exp*cln*Dti NoBlnatcd

4. tmparlBcnt* S*l«ct*d AM S. tsp«riacot*l Dtilgn* Produced •A

'Dalivered during period Juna-Sept. , 197Si £ of th« £ hnva b«en produced.

ETIP would like to generate a wide variety of well researched and

comprehensively developed projects. However, the amount of staff

time available for these efforts is necessarily limited. But even

if it were otherwise, there is merit in securing the views of

people who are active in the area of regulation but who are not

employed by the Government. Thus ETIP let two contracts for the

design of six potential experiments. Under these contracts, the

contractor is responsible for: developing a conceptual framework

from which to work; a list of potential experiments which the contractor feels would be suitable for ETIP to conduct with another

agency; and, after discussions with ETIP, six of these nominees will

be selected and a full experimental design will be prepared for each.

In addition, the contractor will be responsible, on a task order

basis, for providing consultation services to ETIP.

The second of the contracts focuses on agencies which regulate

several sectors of our economy. This contract was awarded to the

Public Interest Economics Center. PIE-C prepared a paper entitled

"Regulatory Change and Innovation" which identified and briefly

discussed many of the issues affecting the relationship between regulation and innovation. With that background, a list of 33 potential

experiments was prepared, and from that list about ten were selected

for a preliminary writeup. That list was narrowed again, and the

following experiments are being fully designed by PIE-C:

• Health care delivery (alternative rate setting procedures

to promote efficiency and innovation in hospitals)

• Pollution abatement

- the effect of elasticity of demand on the willingness of

a firm to cooperate with a standard and innovate in meeting

its responsibilities

- the potential use of effluent taxes and the effect of tax

subsidies on acquiring pollution control equipment

• Hiring practices of the government and their effect on the

regulatory environment

• Industry responses to an extension of time to comply with

emission standards

• R&D Pooling (an analysis of what factors should be considered

in determining whether the aggregation of R&D efforts by

several firms would be economically and socially desirable)

A- 31
47 . Accelerating the Establishment of Standards and Their Adoption

as Regulatory Guides by the former Atomic Energy Commission

Purpose : To determine whether any or all of four changes in the

method of developing nuclear standards is a desirable method for

accelerating the establishment of responsible standards which are

approved by ANSI and adopted by the Nuclear Regulatory Commission.

Milestones: fy 7* fy 75 fy 76

J JASON D J F M A H J JASONDJFHAMJ

1. AEC Contracts with ANSI A

2. ANSI Lets Contract for Work A

3. A

4.

i.

Committees tegin Work

Work Completed

PrellBlnary Evaluation Report A

For the fulfillment of their duties, many regulatory agencies must

develop and promulgate highly technical standards. These standards

are inevitably based on the state of technology of the relevant area,

and it is these which provide the direct interface between technology

and regulation. One way of developing these standards is by means

of the traditional manner of establishing consensus, or "voluntary,"

standards. These are developed outside the agency by a committee of

people with a practical familiarity with the subject matter and, once

developed, they are tendered to the agency for incorporation into its

regulatory scheme.

This experiment, run in cooperation with the NRC and the American

National Standards Institute, made several changes in the normal way

consensus standards are drafted to see if their development can be

expedited and the information underlying them increased. It tested

the use of a full-time committee chairman instead of the normal case

of having someone do the work in his spare time. Another aspect

was to provide technical editorial services for the preparation of

early draft standards. Another was to provide a committee with technical secretarial help to expedite the translation of committee

discussion into draft standards. Finally, it broucrht committees

together for an extended period of time by paying out of pocket costs

in an effort to substantially reduce the amount of time consumed by

coordinating views via the mail, telephone, and through shorter

meeting periods.

The contractor for this project is Battelle Northwest Laboratories.

Work was completed on the project in May, and preliminary results

look quite promising, in that it appears that the development time

for these standards can be reduced from two years to several months.

Battelle is currently gathering up the relevant information to be

incorporated in their final report which is due in October.

A-32
48 . An Experiment in the Regulation of Pesticides

Purpose: To provide enlightened information on what alternatives

may exist to foster the development of effective pest control

systems which conform to national goals and to spark discussion

as to what should be done to stimulate innovation with respect to

safe and effective pest control systems.

Milestones : „ ,5 . „ rr 77

H A M J JASONDJrMAMJ J A S OKDJFMAHJ

1.

2.

Concracc Awarded

Project Initiated A

A

3. Draft Report - Historical

Perspective and Aaalfsls A

*.

of Potential Incentives

Report Widely a'lstrlbated A

5. Forua Held to Discuss Findings

and RecoaaeDdatlons

1 6. Final Report o£ Project and ^

Forua

EPA is in the process of implementing a new scheme for the regulation

of pesticides. This scheme is expected to increase significantly

what is already an extraordinary amount of money and time required

to comply with the testing requirements that are necessary for

approval by EPA. The fear is that these factors, along with other

regulatory problems, will discourage the development of new pesticides

and other forms of pest controls. Many of the same problem.s are

encountered in other regulatory settings, especially where a product

must be approved by an agency before it nay be marketed. The

results of this project should thus be widely applicable.

This experiment is examining actions the Federal Government, and

in particular EPA, can take to reduce the high costs of complying

with the regulations and will determine what might be done to otherwise provide an incentive for the discovery, developm.ent , and use

of new pest controls. As part of this project, a forum of interested

parties will be convened to discuss the findings of the study. The

hypothesis of the project is that this detailed examination of incentives, followed by a forum to discuss the implications of the various

alternatives exam.ined in the study, is a mechanism which will facilitate the adoption of changes which will provide incentives for

innovation in this important field.

Among the changes being examined are: the certification of nonfederal laboratories for product testing; federal testing; increased

codification of certification requirements; the use of a revolving

fund to shift certification costs from front-end to dovrnstrean

based on royalties; and the effect of insurance on the marketing

and use of pesticides.

Arthur D. Little is conducting the project under contract with EPA.

Thus far, work has concentrated on the process by which pesticides

are discovered, developed, approved, marketed, and used. This

information will then be used izo identify areas which might respond to an appropriate incentive.

A- 3 3
7 6 . Experiments in Computer Applications for Regulatory Agencies

Purpose : To determine the effect of modern data processing equipment in (a) expediting what is now a time consuming regulatory

process and (b) permitting a more sophisticated analysis than is

now possible with respect to several aspects of the requlation of

electric utilities.

Milestones

1. Contract Awarded

2. Project Initiated

3. Reg. Lag A - Hanagemeot

(Ohio)

«. Reg. Lag B - Cose Application

(N.C.)

(N.Y.)

5. Rate Structure Methodology (N.Y.) tmplrlcal Studies (Ohio) Cane Application (N.C.)

6. Project Anulysls 4 Long Range

Plann Ing Lost Analysis (Ohio) Load Forecasting (N.C.)

7. Performance Evaluation

(N.Y.) (N.C.)

8. Final Report

^Beginning of Task

FY 75 FY 76 TP FY 77 JASONDJFMAHJ

A

•A

A

A

A

ONDJFHAMJ

A

A

During the process of the regulation of electric utilities by the

various state public utilities commissions, vast amounts of information must be gathered, quantified, analyzed, and processed before

a hearing on a rate adjustment can be held. Once the hearing is

conducted, all the information must be taken into account and a final determination made as to the rates. All this requires a long

time, so that by the time the process is complete, the information

is frequently up to three years old. In relatively stable time,

this staleness is not of dire consequences and may even be beneficial.

But in times of high inflation and changing energy requirements, it

can cause severe hardships for utilities and, ultimately, the consumers

This project, run in cooperation with the Federal Power Commission,

is addressing many of the pressing issues with respect to the regulation of electric utilities:

• Regulatory Lag — caseload management within a Commission

• Regulatory Lag — analytical procedures used in rate cases

• Rate Structure — peak load pricing; elasticities of

demand; cost of providing service

• Project Analysis and Long Range Planning — building appropriate capacity to meet future demand

• Performance Evaluation — testing whether a firm is operating

efficiently and spotting problems early.

The firm of Temple, Barker & Sloane is performing the work under

this project. TPie states of Ohio, New York, and North Carolina

are cooperating with the project, most of the actual work of it will

be performed in conjunction with the commissions of these states.

A-34
85 . Using Technology to Increase the Information and Decrease

the Time for the Regulatory Process

Purpose ; To use modern information handling technology to increase

the information and decrease the time for developing regulatory

standards.

Milestones

T1 75 FY 76 TP FY 7 7

1. Funds Transferred

2. Consultant Hired by OSHA

3. Review of Specific OSHA Needs

and Available Technology/

Services

i. OSHA/ETIP Hanageaent Appraisal

5 . RFP Prepared

6. ConcracC Awarded for Work

7. ADP Work Begins

8. If Work Is Not to Continue,

Begins Co Wind Down

9. Evaluiclon of Project

10. Report on Project

JASONDJFMAMJ

A

A

A

A

A

ONDJFHAHJ

A

A

A

P'rogress ; During the process of setting the standards which concern employee safety and health, a number of factors must be taken

into account—technical feasibility, economic effect of different

levels of protection, the worker's psychological reaction to a

requirement, and the ability to administer the requirement without

protracted litigation. In order to do this, information must be

developed on each of these areas and its nuance and implication

analyzed and understood. Thus it is essential that all available

information be incorporated in this process. But even the information now presented in the proceedings leading to the development

of a standard can be vast and consequently difficult and timeconsuming to master.

This project, run in cooperation with the Occupational Safety

and Health Administration, will use modern information handling

technology in an effort to increase the amount of data available

for the setting of standards and to expedite the handling of all

the information generated.

OSHA has begun work on this project by retaining the services

of an information specialist who is matching OSHA's need to the

latest available technology; they have also hired a management

consultant to survey their standards-setting operations to determine those areas which could benefit the most from better information

processing abilities. Once that work is completed, an RFP will

be issued to procure the services identified in the survey. OSHA

will then experiment with these services to determine whether, and

how much, they actually aid in the process of developing standards.

A-35
95 . Evaluation of ETIP/NRC Standards Development Project

Purpose: To conduct the evaluation of ETIP Project #47 in order

to determine whether the changes made to the standards development process are a beneficial way of developing these highly

technical standards.

Milestones:

FY 7 5 FY 76 TP FY 7 7

M J J A S 0 N D J F M A K J J A S ONDJFHANJ

I. Funds Transferred it

A

A

2. Contract with ANSI

3. ANSI Contract for Evaluation

It. Evaluation

Final Report Completed, and A

This project, run in cooperation with the Nuclear Regulatory

Commission, is the formal evaluation stage of ETIP Project 47,

"Accelerating the Establishment of Standards and their Adoption

as Regulatory Guides by the [Nuclear Regulatory Commission]." The

ultimate questions to be addressed by a contractor hired for the

purpose will be:

• Have the schedules for the development of the standards

(both the overall schedule determined without regard to

Project 47, and the schedule determined by the project

manager for the project) been met?

• Did any of the changes made during Project 47 significantly

reduce the time required to develop a responsible standard;

if so, which ones and how did they do so?

• Are the standards of high quality, in that they are readily

acceptable by the Commission and in the opinion of the

Commission's staff they are comprehensive and as easy to

use as is practicable?

• Did the project generate a more effective and efficient

use of the working group members?

En route to answering these ultimate questions, the contractor

will be expected to make a careful analysis of the effect of the

various changes on the process of developing consensus standards.

The NRC is currently in the process of contracting for this

evaluation.

A-36
CIVILIAN R&D AREA

Purpose : To initiate, in response to Congressional mandate, an

expanded fire, textile, and apparel f lammability research program

and to conduct an experiment on federal civilian R&D funding

policies within a regulatory context.

Milestones

FY 74 ry 7S FY 7 6 TP FY 77

J JASONDJFMAMJ JASONOJFMAMJ J A S 0 N D

1.

2.

Contract awarded. Project Initiated. AA

3. Initial Theoretical

Investigation

Completed

4. 1st Year Report.

5. Conplete all Theoretical Investigations.

A

6. Coniplete lyevelopiHent Phase

A

7. Final Report. A

Progress : Contract awarded to a consortium headed by Clemson

University and including University of Mar^.- land , Polytechnique

Institute of New York, Research Triangle Institute, U. S. Department

of Agriculture Laboratory at New Orleans, Hooker Chemical and

Plastics Co., American Enka , Dovz-Corning and United Merchants and

Manufacturers. Contractor was selected based on criteria that

heavily weighed:

(1) the social and economic rationale presented for the selection of

the specific problem to be addressed by the contractor, within a government defined broad problem context (cotton-polyester

f lammability ) , and

(2) the proposer's plan to pursue early commercialization of the

research results.

Investigations designed to develop a fundamental understanding of the

technical and scientific problems associated specifically with the

flame retardants of cotton-polyester blend fabrics have been highly

successful. It is now possible to predict with a high degree of

certainty, the types of chemical agents which should be effective in

rendering cotton and polyester fabrics flame retardant. In addition,

the interaction which occurs between fiber systems in a blend have

been elucidated. Studies have been completed on blends of untreated

fibers and on those where one or both contain specific types of chemical

modifications. Therefore, it is now possible to predict the effect of a

given flame retardant on the flammability of both the individual fibers

and the blend. Consequently, it has been possible to determine the

effect of various distributions of the flame retardant chemicals among

fibers in several systems. This has major implications for the optimiza- tion of flame retardant application technology.

Four specific approaches are now under investigation. They involve

radiation grafting intrinsically flame retardant polyester fibers,

two reagent af tertreatments and single chemical af tertreatment

Encouraging preliminary results have come from these efforts, but

it is premature to forecast likely impact on improved flammability

characteristics in the 60 to 70 percent of this country's wearing

apparel represented by cotton polyester blends.

A-r37
11. Analysis of Federal Demonstration Projects

Purpose : To develop cost, benefit, and market/industrial/

institutional criteria and guidelines for the use of federally

procured demonstration projects as catalysts for technological

change

.

Milestones:

FY 74 FY 75 FY 76

1. ContT'ict award. ^

JAJ A S 0 N D J F M A M J J A S 0 N D

2. Complete field work Phase I cases. A

3.

4.

Report of Phase I. Complete field work

Phase II cases.

\ A

A

5. Final report. A

Progress

;

The RAND Corporation is analyzing federally-funded

demonstration projects in order to understand:

a) under what circumstances is a federally-funded demonstration

project an appropriate instrument of government action?

b) how should a demonstration project be organized, funded,

managed, and its results disseminated in order to maximize its

effectiveness?

The study has been underway since the summer of 1974. During Phase I

of the project, a conceptual framework was developed, fifteen

case studies of demonstration projects carried out, and a tentative

set of hypotheses and guidelines relevant to the two questions

above generated. A report on Phase I was submitted to ETIP in midAugust. During Phase II of the study, RAND will undertake further

case studies to validate the Phase I hypotheses and guidelines.

The Phase II report is due in early 1976.

Examples of the study's tentative findings are:

a) demonstration projects are a tool of government intervention with a narrow scope for effective use. Only where uncertainties are in the middle range, or where uncertainty is high in

only one particular dimension, will demonstrations materially

affect the diffusion process.

b) success of demonstration projects depends much on the

demand for the product or process. The question, "Who will use

it?" should be at the forefront in the thinking of planners for

future demonstration projects.

A-38
13 . Diffusion of University Research Output

Purpose

To determine if the rate (frequency) of patent applications

originated

systematic

and staff.

by university researchers can be increased through a "awareness" program involving administration, faculty.

Milestones

1. Pro;e<:t i-;:ti3ted.

2. F=.;r u-iversity prc-grans

3. P.ez^zrt cf Isc year's activity.

4. Fc-r zars .;niversity programs

initiated

5. Final report.

J A S 0 .S SO.SDJFHAMJ JAS

Progress : This project is jointly sponsored by ETIP and NSF . The

grantee is the Research Corporation. The University of Georgia was

the first institution visited by the Research Corporation team. The

nijmber of invention disclosures that have resulted from the first

and follov7-up visits at Georgia has been at a continuing rate v;here

the monthly number of disclosures is exceeding the number disclosed

annually prior to this project activity. Other universities where

programs were initiated were the University of Maryland, University

of Michigan and Princeton University.

A" 3 9
19 . Federal Funding of Civilian Research and Development

Purpose : To increase the understanding of how federal R&D funding

has in fact functioned as an agent of technological change in the

private sector.

Milestones : FY 74 FY 75 FY 76

1. Award contract

J

A

JASONDJFMAMJ JASONDJ

Determine where the federal

hierarchy policies toward the

funding of civilian R&D

originate

Characterize the explicit and

implied policies used to allocate funds for civilian R&D.

Define the explicit or implicit

objectives of federal civilian

R&D funding.

Identify alternatives to R&D

funding which could have

achieved the same objectives,

and to determine whether they

were considered by the funding agency (ies).

Assess the relative efficiency

of federal R&D funding in

accomplishing stated objectives.

Assess the efficiency of existing

federal policies toward the

support of civilian R&D. ^

Final report.

These tasks being accomplished

as a continuum in six separate

target sectors.

Progress : Arthur D. Little, Inc. is engaged in a study intended to

increase understanding of how federal R&D funding has functioned as an agent of technological change in the private sector. The study

has been underway since the summer of 1974. The first draft of the

study's findings will be completed by the end of August. The final

project report is due by the end of 1975.

In carrying out the study, ADL has analyzed in depth the policy

history of federal R&D programs in six areas:

- nuclear power

- local extraction and conversion

- motor vehicle safety

- urban mass transportation

- food processing

- biological pesticides

In addition, ADL is preparing a "cross-cutting" analysis of similarities

and differences in the six areas. This analysis will be the basis for an assessment of the efficiency of existing federal policies toward

the support of civilian R&D. Until this analysis and assessment is

completed, it is not possible to report on the study's findings.

A-4r)
67 . (Modular) Integrated Utility System

Purpose : To test the capacity of a federal program office in the role

of a "technology broker" to foster the introduction of (M) lUS Technology

into large institutional applications.

Milestones : FY 74 FY 75 76

J A 5 0 N D J JASON D J F .X A y. J

1.

2.

In-erager.cy Acreeir.enc. Award Cor.SLiltant Contract. A

A- -A

3. A^ard Applications Contract. Solicit Host Interest.

5

Ctrt.ete Tecnnical Aasessnent

Report. A- - - - -A

6. Select Hosts. A- A

7.

8.

Final Applications Report.

lUS G^aide Report.

A- - -A A A

Progress : This project is being conducted in cooperation with the

Office of Facilities Engineering and Property Management of the

Department of Health, Education and Welfare. The consultant contract

was awarded to Paul Geiringer and Associates of New York. The

applications contract was awarded to Reynolds, Smith and Hills

of Jacksonville. Slippage V7as encountered because the ethics of

the professional engineers will not permit cost-sharing arrangements.

This experiment seeks to provide definitive preliminary engineering and

cost information to a selected educational institution and a selected

medical institution so the institutions can make informed decisions on

building lUS installations. More than 4 0 potential hosts have

signified an interest in participating in the project (see also

Project 96 - Case Study of Project 67).

A-41
87 . Management of Federal Civilian Research and Development

Programs

Purpose

:

(1) To describe and analyze the practices of the Federal

Government for planning, implementing, managing, and evaluating

civilian R&D programs with emphasis on effectiveness of delivery

to the user, and (2) to develop, on the basis of the above analysis,

models for the conduct of civilian R&D programs with the aim of

increasing the likelihood of greater economic and social benefits

to society.

Milestones:

FY 7

5- FV 75 T P FY 77

J JASONDJFKAUJ J A S 0 U D J r K A M J J A S

1. Contract award. A.

2. Complete conceptual framework. A

3. Complete pilot interviews. A

4. Coinplete pilot analysis. A

5. Complete full scale interviews. A

e. Complete full scale analysis. A

7. Complete methodology. A

8. Final report. A

Progress: Contract awarded to Stanford Research Institute.

Project start date was July 21, 1975.

A- 4 2
96. Real Time Case History of ETIP Project #67 (Integrated

Utility System)

Purpose : To develop the necessary information on a continuing basis

that will permit an objective evaluation of progress on ETIP

Project 67 (Integrated Utility System)

Milestones

FY 75 FY 76

J JASONDJFMAMJ

1. Award Contract.

2. Mid-term Briefing.

3. Final Report.

Progress ; Purchase order issued to System Planning Corporation to

prepare case study. Miss Jean Taylor designated principal investigator. Miss Taylor has interviewed DHEW and ETIP staff for background

on Project 67 and has attended working sessions of the project

steering group.

A- 4 3

SMALL TECHNOLOGY-BASED FIRMS
9 • Analysis of Imperfections in Capital Markets

Purpose ; To examine the availability of venture capital and

its allocation and investigate the allegation that the existing

capital is improperly allocated.

Milestones

:

FV 75 FV 76

J A S OHOJFMAMJ J A S 0 N D

1. Contract award2. Literature survey, venture capitalist survey, and begin

development of analytical

framework

.

3. Complete analytical framework and apply to give quantitative esti-^ mates of imperfections.

4. Final -Analysis of candidate im- perfections and preparation of policy recommendations.

\ A

Progress : The study is one year old with six months remaining.

The work is divided into three tasks, each approximately six months

in length. Thus, tasks I and II have been completed with task III

just beginning.

Task I consisted of a thorough review of the economic and institutional literature on the venture capital industry and a survey

of venture capitalists to develop an understanding of the

institutional behavior characterizing this industry. The literature

survey confirmed ETIP ' s rationale for selecting a contractor with

strong economics capability—there did not exist a thorough and

detailed economic analysis of venture capital markets. Task 1 also

began the development of an economic model of the venture capital

market

.

Task II continued this development as well as completion of the

survey and an analysis of the survey's results. The model was

applied to obtain, where feasible, quantitative measures of market

parameters which was then used to assess the existence and

severity of hypothesized imperfections in venture capital markets.

The primary sources of data were SEC registration statements, IRS

income statistics, financial reports of SBIC and non-SBIC publicly

held firms, and survey data from an NSF report prepared by the

Diebold Corporation. In addition, a detailed framework for the

evaluation of alternative policy responses to identified imperfections was begun.

Task III will consist primarily of utilizing the quantitative and

qualitative analyses of tasks I and II to provide policy evaluation

and recommendations. Tentative imperfections will be thoroughly

analyzed and classified into three categories: the structure of

capital markets; (2) the behavior or policies followed by suppliers

of venture capital; and (3) securities and/or taxation regulations.

The management problems for the remaining portion of the study

are two-fold: (1) insure that the analytical work leads into

types of policy recommendations that are amenable to experimentation;

(2) force the form of the final report to be highly usable by -both

aovernment officials and members of the venture capital industry.

A~44
27. Evaluate Small Firm Business Potential

Purpose ; To investigate the possibility of developing a systematic

procedure that will permit the evaluation of technological risk to

a degree that will permit a loan guarantee and/or direct loan program that would be financially sound.

Milestones

FY 74 FY 75 FY 76

J JASONDJFMAMJ J A S 0 N D J

1. Interagency Transfer.

2, Go-No Go Decision. A

Progress ; This project requires the cooperation of the Small Business

Administration. Preliminary arrangements were completed with staff

members at SBA who have now left the staff. A controversy has

developed as to whether any effective set of criteria can be developed

to be applied by SBA personnel in rating innovative small firms. This

stems from the belief of a number of personnel that small firms are so

heterogeneous in nature that no classification scheme is practical.

Discussions are continuing within the SBA and with personnel from the

Bank of America and Girrard Bank. Information from these discussions

will be developed by January to lead to a Go-No Go decision with

respect to this project.

A-4 5
28 . Assisting Small Firms Required by Regulation to Undergo Technological Change ~~ ~~~

Purpose: To evaluate alternative policies that the Government

might pursue in assisting small firms to comply with impacting

government regulations.

Milestones

:

FY 75 FY 76

1. Contract award (CAI, $199K)

.

2. Literature search, interviews.

3. Formulate hypotheses.

4. Tuntdtivc rocomtncndationB.

5. Final report.

NDJFHAMJ

A

J A S O N D

A

Progress : This study was initiated with SBA's Office of Advocacy,

Planning, and Research to determine the impact of federal, state,

and local health, safety, and environmental regulations on small

firms. The focus is on regulations which would require the firm to

undergo technological change. Are small firms affected more

seriously than large? How can the Government help them comply? In

answering such questions, the contractor interviewed small firms,

trade associations, agencies, and other sources. In the process,

they found fragmentation of regulation affecting small firms . . . problems raising capital for "non-productive" investments in compliance techniques ... a tendency to seek "end of pipe" rather

than "process" solutions . . . economies of scale in complying with

environmental standards . . . lack of small business voice in

Washington

.

The final report, due in September, will contain recommendations for

SBA policy. At SBA there is continued interest in the results of

this study. For example, the Office of Advocacy, created last year

to represent small firms' interests vis-a-vis the agencies, will use

the report to help decide where in the legislative or rule-making

process they should enter. SBA will also use the report as a spring- board to analyze more thoroughly the impact of regulation on small

firms in selected industries. In addition, they are examining its

recommendations to see which ones appear feasible as ways of assisting

small businesses to comply with regulations.

A-46
32 . Connecticut Product Development Corporation

Purpose : To evaluate the viability, in the economic, social,

political , and technological climate of the U. S., of the ability

of a State owned corporation to stimulate economic activity by costsharing product development.

Milestones

FY 74 FY 7 5 FY 7 6 TP FY 77 FY 78 FY 79

JUN. JUN. JUN.

1. Contract awarded.

^

2. All ETIP funds

obligated

A

3. Expiration of

primary data rights.

i A

Progress : CPDC has invested in six firms, five with ETIP money and one

with State money. The ease with which State bond funds were obtained

indicates that further State funds will flow without a great deal of

difficulty. EDA may provide additional operating funds for CPDC. The

CPDC staff is in the process of mounting a campaign to attract more

applications for their funds. This is now appropriate because the

CPDC staff has recently been augmented. (See Project 78 evaluation

of CPDC experiment)

A-47
4 6 . Technical Competency Evaluation

Purpose : To investigate if it is possible to certify in a systematic

way that small firms have sufficient competence in certain types of

R&D so that reasonable competiton can be obtained if the contracts are

set aside for small business.

Milestones :

FY 74 FY 75 FY 76 TP FY 77

1. Interagency agree- ment .

J J A S 0 N D J F M A M J JASONDJFMAMJ J A S ONDJFMAMJ

2. Contract award

.

A- - A

3. Complete

pi jn

.

prel iminary A- - ..... /V,

4. Complete

plan.

.r,;„,|,l,..,; test.

operating

(tr ' 1 i III i n.-i ry

A - A

A- - A

C. Com;jloto opera L lo onc-yt'O r lal tL-sL. A

7. Final report. A A

Purpose: This project is being conducted with the cooperation of the

Small Business Administration. The process of working out the specific

details of the request for proposals proved to be much more time

consuming than had been forecast. The contracting procedure is now

going forward and 17 proposals have been received. It is anticipated

that the revised milestone schedule will be met.

A-48
77 . S\^posiuin on Assistance to Small Technology Based Firms

Purpose : To promote government-industry dialogue on problems

and solutions.

Milestones

FY 7 5 FY 76

A M J J A S

1. Interagency Agreement.

2. Contract Award.

3. S\^posiuin. A

4. Final Report. A

Progress

Cooperative project with the Sm.all Business Administration. Contract

to hold s\^.posi^am av;arded to American Association of Small Research

Companies. Symposium workshops were conducted as scheduled on the

topics of evaluation and rating of small R&D firms, the advisability

of set asides in R&D, goverrjuent venture capital activities, and

methodology for evaluation of energy inventions.

A-4 9
78 , Data Collection, Summarization ^ and Interpretation for ETIP

Project with Connecticut Product Development Corporation

Purpose : To provide the basis upon which an evaluation can be made

to the viability of this type of State organization in a U. S.

environment. The information will also serve as a basis for recommendation relative to the advisability of fostering similar organizations in

other States.

Milestones:

FY 75 FY 76 TP FY 77

1. Award contract.

JA

JASONDJFMAKJ J A S 0 N D

2. Develop data collection

plan.

3. Complete data collection. A

4. Complete surjnarization. A

5. Final report. A

Progress ; Contract awarded to Charleswater Associates of Cambridge,

Massachusetts. Preliminary review of CPDC files made. Principal Investigator has attended two CPDC client review sessions and will regularly

attend CPDC Board meetings. Data collection plan completed and approved

for pilot use.

A-50
79 . Survey of Five-Year Results of Innovation Loan Program

Purpose : To gather information on the financial aspects of the

SBA's 1967 and 1968 Innovation Loan Program. This information

will provide a basis for policy recommendations or experimental

activity to innovation loans.

Milestones

FY 75 FY 7 6

J

A

1. Contract awarded.

J A S 0 N D J F M A M J

2. Complete information collection from SBA.

A

3. Complete interviews with

recipients

A

4. Complete analysis. 1 A

5. Final report. 4. \

Progress : Contract awarded to Moshman Associates. Meeting held

between the contractor, ETIP, and the Small Business Administration.

First examination of files conducted at the Boston SBA regional office.

SBA has forwarded a letter from headquarters to the Regional Administrator requesting cooperation since Mr. Kleppe has approved SBA

participation on the project. Some identification problems encountered

because SBA innovation loan files do not have a unique identifier.

So far 30 files have been located through the memory of SBA field

personnel, with several more regional offices yet to report.

A-51

PLANNING & RESEARCH AREA
17 . Contingency Planning for Anticipated Technological Crises

Purpose : To develop an understanding of what federal policies are

needed under what circumstances to deal with major economic disruptions in markets for critical raw materials.

Milestones

:

' FY 75 FY 76 JA60NDJFHAMJ J A S 0 N D

1. Start project.

2. Task 1:

a. Literature review and development of conceptuaX franteworK.

b. Refinement of conceptual

framework.

/A

A

3. Task 2: Dovolopmont of econometric modol

cf seven critical commodity markets; application of. A A

4. Task 3: Policy analysis and development on

all economic and some political

factors; emphasis on role of

technology.

A

5. Final report. A

Progress : The study is one year old with six months remaining.

The work is divided into three tasks, each approximately six

months in length. Thus, tasks I and II have been completed with

task III just beginning.

Task I consisted of a thorough review of the economic and political

history of each commodity market: aluminum (bauxite), chromium

(chromite) , cobalt, copper, manganese, petroleum, and platinum

and palladium. These reviews are exhaustive to the point that

they are usable in isolation from the subsequent segments of

the project. Also, a portion of task I was devoted to the

development of an analytical framework for evaluating the susceptability of a commodity market to supply and price distortions.

This framework has been continually refined under task II.

Task II consisted of the intensive application of the analytical

framework to each commodity market. This includes the estimation

of market parameters such as demand and supply elasticities

(both for the short and long run) . Such econometric estimation

along with simulation, forecasting, and sensitivity analysis provides a comprehensive and detailed description of the structure

and dynamics of each market.

Task III is presently in its initial stages and will utilize the results of the first two tasks to perform policy analysis and to develop

policy recommendations. Emphasis will be on the development of a methodology for evaluating the entire range of policy alternatives.

This will include the application of the economic models to short-run

policy tools such as stockpiling and import restrictions to the longrun measures such as increasing production flexibility through technological substitution.

The management problem in this final task will be to assure a systematic

and equal treatment of each policy alternative and to present these results in a format which can readily be used by federal agencies.

A-52
94 . Evaluation of ETIP Program

Purpose : To have an interim study of the ETIP program that will be

useful to the Academy ETIP Evaluation Panel and the Bureau of

Standards in making decisions on the future conduct of the program,

its funding level, and other relevant program characteristics.

Milestones

ASONDJFHAMJ JAS ONDJ

1. Start evaluation.

2. Coaplete internal structure 'an3 process phase.

3. Coisplete intra-agency process

phase

4. Complete full study.

5. Final report. A

A

Progress : Project initiated under the direction of the NAS/NRC

ETIP Evaluation Panel in July 1975. Principal Investigator is

Dr. Gerald Britan of Northwestern University.

USCOMM-NHS DC A-53
NBS-1 14A (REV. 7-73)

\J • J . \—> ZL 1 1 . \J I \^ V_y rVI lYl . BIBLIOGRAPHIC DATA

SHEET

1. PUBLICATION OR RI'PORT NO.

NBSIR 75-778

2. Gov't Accession

No.

3. Recipient's Accession No.

4. TITLE AND SUBTITLE

ETIP: THE FIRST 18 MONTHS

A Progress Report of the Experimental Technology

Incentives Program, Nat'l. Bur. of Stds.

5. Publication Date September 1975

6. Performing Organization Code

7. AUTHOR(S)

Lewis, Jordan D.

8. Performing^ Organ. Report No. NBSIR 75-778

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

10. Project/Task/Work Unit No. 1150066

11. Contract/Grant No.

12. Sponsoring Organization Name and Complete Address (Street, City, State, ZIP)

SAME AS 9

"

13. Type of Report & Period Covered Interim

thru August 1975

14. Sponsoring Agency Code

15. SUPPLEMENTARY NOTES

16. ABSTRACT (A 200-word or less factual summary of most significant information. If document includes a significant

bibliography or literature survey, mention it here.)

This internally prepared report describes the overall accomplishments

of the Experimental Technology Incentives Programi in carrying out

its mission. Progress is compared with the plans that were established

in a program plan approved by the Secretary of Commerce in February

of 1974. An appendix to the report describes the purpose and shows

progress of each of the individual projects that ETIP has launched.

17. KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first letter of the first key word unless a proper name; separated by semicolons) Q^^^l^^j^ ^^j^ Pollcy, ETIP, InCentiveS , InnOVatlon , Procurement Policy, Regulatory Policy, Small Business Policy,

Technology

18. AVAILABILITY Unlimited 19. SECURITY CLASS

(THIS REPORT)

21. NO. OF PAGES

1 ! For Official Distribution. Do Not Release to NTIS

UNCLASSIFIED 72

1 1 Order From Sup. of Doc, U.S. Government Printing

Washington. D.C. 20402. SD Cat. No. C13

Office 20. SECURITY CLASS

(THIS PAGE)

22. Price

|X j Order From National Technical Information Service

Springfield, Virginia 22151

(NTIS)

UNCLASSIFIED $ 4.25

USCOMM-DC 29042-P7'l